After a substantial surge fueled by optimism surrounding AI and foundry operations, shares of major semiconductor companies retreated sharply on Tuesday as investors moved to lock in profits.
Market Performance Shares of Intel (INTC) closed down 6.82%, following a gain of over 100% in the past month through Monday's close. Qualcomm (QCOM) fell more than 11%, while Advanced Micro Devices (AMD) declined approximately 2.3%. All three companies had reached record highs just the day before.
This pullback follows a period of strong gains for the semiconductor sector, with the iShares Semiconductor ETF up 77% year-to-date, as investors heavily bought into companies seen as beneficiaries of the AI boom. Market observers believe investors are now taking profits from this rally.
Deutsche Bank analyst Ross Seymore noted, "While the market currently appears to be placing more emphasis on directional momentum than terminal valuation, and foundry momentum has improved, we believe the potential positives are already fully reflected in Intel's current stock price."
Some analysts also pointed to signs of softness in traditional computing demand. Analysts at KeyBanc Capital Markets stated that April notebook shipments fell 27% month-over-month, presenting a headwind for PC-focused chipmakers like Intel and AMD.
Foundry Business Fuels Intel's Rally Intel has been one of the strongest performers in the sector in recent months, with investors growing increasingly confident in its efforts to transform into a major contract chip manufacturer. The stock has more than tripled since late March. Reports suggest Apple could become a significant foundry customer.
It is reported that Apple and Intel, after more than a year of discussions, have reached a preliminary agreement for Intel to manufacture some chips for Apple devices. Bank of America analysts estimate this opportunity could ultimately represent a $35 to $40 billion market.
Bank of America analyst Vivek Arya stated that if Intel captures a meaningful share of this business, its annual revenue could increase by more than $10 billion. However, the firm also cautioned that these benefits could take years to materialize. Intel would need to make substantial investments in new factories, testing facilities, and production infrastructure, with significant revenue growth potentially not realized until 2028 or later.
Bank of America raised its price target on Intel from $56 to $96 but maintained its "underperform" rating, as the target remains below the current stock price.
Qualcomm's Expanding Growth Narrative Qualcomm's recent gains stemmed from market optimism about its efforts to reduce reliance on the smartphone market and expand into new growth areas like automotive technology, Internet of Things (IoT) devices, and AI computing. Before Tuesday's decline, the stock had surged 41% over the past five trading days, its strongest five-day performance since 2019.
In late April, Qualcomm reported quarterly results that beat expectations, with investors reacting positively to its progress in entering the data center processor business. CEO Cristiano Amon stated on the earnings call that the company expects to begin shipping custom data center chips to a large hyperscale cloud customer in the December quarter.
Despite the recent rally, Wall Street remains cautious on Qualcomm's valuation. According to FactSet data, the average analyst rating on the stock remains "Hold," with the current price trading well above the consensus price target.
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